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Emissions trading and reducing carbon pollution

CHAIR —Good afternoon. We shall recommence after lunch. Thank you for your forbearance with us over our delayed program today. We will pay for that later tonight. I welcome representatives from Lend Lease Corporation and Lincolne Scott Advanced Environmental. Thank you for your submission and the time that you have taken to come here to appear before us today. I invite you to make an opening statement.

Mr Wall —Thank you. As a background, I am a building services engineer. In 2002 I was elected the founding chair of the World Green Building Council, a position I held for five years. In 2003, Ms Atkinson and I co-founded the Green Building Council of Australia with the aim of shifting the Australian property industry towards sustainable development.

In 2004, I was honoured to be named the Prime Minister’s Environmentalist of the Year by the Banksia Foundation. In 2008, I was named the Inaugural Sustainability Champion of the Year by the Building Services Journal in London. I have worked on many green building projects, some of which you may be aware of, including the iconic Melbourne City Council office, Australia’s first six green star building; Lend Lease’s global headquarters in Sydney, 30 The Bond, Australia’s first five green star building. I also delivered the United States’s first carbon positive building on the Big Island, Hawaii, which is also the seventh rated platinum building in the US. I am currently working on a project to create a sustainable city in the Incheon Free Economic Zone, Korea. In short, my career is built on driving outcomes in the building sector that raise the bar for sustainable development and are commercially sound.

We look forward to working in partnership with, firstly, the Garnaut climate change review, and later with government, to help shape a way the non-residential building sector could contribute to the response to climate change for emissions reduction for the benefit of the Australian economy. As our submission states, we support the choice of emissions trading as an integral part of Australia’s policy towards carbon pollution. However, we are concerned that major opportunities in our sector are missed. The fact is that the building sector/property industry has the skills and the technology to deliver deep emissions reductions right now. We are not waiting for some new miracle technology. 30 The Bond, the project we delivered for Lend Lease, has been producing 48 per cent less greenhouse gas emissions than the average Sydney office building for the last five years with no commercial detriment to value, largely thanks to technology first used in London in 1969.

While we have demonstrated that it is commercially viable to use that technology in new buildings addressing emission reductions, the existing buildings are another story. The challenge is how to find a way to provide an incentive to building owners to make the necessary capital investment to deliver energy efficiency improvement in existing buildings, and to do that in a way that will drive deep emissions reductions quickly at little or no cost to the Australian economy.

Let me say I have come to this as a member of the property industry who believes that the building sector should be held accountable for their carbon footprint in the same way that the rest of the economy must be held accountable. The challenge is how to do this in the face of what we call split incentives or market failures, which are inherent in the nature of our industry. That is because energy costs remain a tiny proportion of the overall cost to a building owner or occupier. For my business, energy costs are less than one per cent of our balance sheet, so even in the current financial crisis energy is not where we look first to drive cost savings. Big business negotiates very cheap prices in our deregulated energy market, so those responsible for the biggest impact on Australian emissions have the least pricing signal to generate the right behaviours. Developers and builders who control building outcomes do not pay the fuel bills, anyway.

We have heard those who say split incentives make it impossible to effectively deal with the property industry and have put us in a too hard basket when it comes to emissions trading. We have heard from those who try to argue that they do not exist. We have even heard from some that they can overcome split incentives through carefully word contractual arrangements. The fact remains that capital is not being invested into our existing building stock to reduce their environmental footprints, even in New South Wales, which has had the complete suite of complementary measures, such as white certificates, for some eight years within its own emissions trading scheme.

Alternatively, we have heard that the CPRS has got it covered and that the energy price signal will flow on to the non-residential building sector, but it will not. As our submission states, by putting the point of obligation for carbon emissions reductions with energy utilities and relying on a diluted price signal to the point of operation in the non-residential sector to drive emissions reduction, the design of the carbon pollution reduction system will provide no impetus for carbon emissions reductions by energy efficiency improvement in the non-residential sector.

The CPRS will not stimulate the required activity for scope to emitters without universally applied and mandated complementary mechanisms that place obligations on the purchasers of electricity. We further submit that all existing complementary mechanisms applied in other countries and by our states, such as white certificates, have failed in the non-residential sector and have not generated significant greenhouse reductions.

We all remain convinced there must be a simple solution. We believe we have identified that solution—a cap and trade scheme for the non-residential building sector, which we believe could deliver a 50 per cent reduction in greenhouse gas emissions associated with buildings by 2020. This has been robustly tested for 12 months with the assistance of other industry players, including Freehills.

Rather than costing our economy and destroying jobs—criticisms that we have heard of the CPRS—our efficient building scheme would also deliver a broad range of co-benefits, which I will leave for Ms Atkinson to discuss. The efficient building scheme will succeed where other measures have failed to stimulate energy efficiency improvements across the non-residential building sector because of four radical shifts that are necessary in this approach. Firstly, we propose to move the point of obligation to the building owner so the obligation is aligned with ownership, opportunity and operation. It can also apply to buildings without the capital investment. Secondly, it creates a low cost of transaction, allowing for universal application and annual auditing to ensure carbon accounting robustness.

Thirdly, it provides reliable benchmark trajectories into the future, providing investment certainty, allowing for assets and liabilities to inform valuations, and provides an ability to balance against deferred infrastructure investment. We are aware that for investment in efficient buildings every $1 spent will save $6.5 in future infrastructure investment on the generation and supply side. That information is provided by the Independent Pricing and Regulatory Tribunal, IPART, in New South Wales. Fourthly, it balances abatement credits with an obligation for inaction, which ensures an equitable approach, provides all the physical instruments of cap and trade emissions trading to the property sector, and allows for standalone operation.

For those concerned that such a scheme may be perceived as another carbon tax, we note that the scheme is developed to be a true market mechanism, with no revenue generation for the government. We are aware of the cost problems in making our generators more efficient, and this approach removes a significant reliance in the economy on base load generation by ensuring deep cuts in demand rather than just improving the efficiency of a generation source.

I conclude by repeating the words of acclaimed climate scientist Dr Joseph Romm, who is quoted in our submission: ‘Whatever technology we have got now, that is what we are stuck with to avoid catastrophic warming.’ In the words of IPCC head Dr Pachauri:

If there is no action before 2012, that’s too late. What we do not do in the next two or three years will determine our future. This is the defining moment.

The efficient building scheme provides a mechanism to enable the building sector to use existing technology now to drive deep, fast, low-cost emissions reduction for everyone’s benefit.

CHAIR —Thank you.

Ms Atkinson —Thank you for the opportunity to appear here today. My background is as an environmental scientist. However, most of my professional life has been working in the construction and property development sector. From the mid-1990s I worked on several Olympic construction projects, including the Mirvac and Lend Lease Olympic Village. As Mr Wall has already mentioned, in 2003 we co-founded the Green Building Council of Australia with the aim of driving a shift to a sustainable property industry. I was the founding CEO. I also continued to represent the industry on the Australian Building Code Board. This is my third year.

In 2006, I returned to Lend Lease as its Global Head of Sustainability. I am a member of the Global CEOs Executive Team, and Lend Lease is a global property company that employs some 10,000 people and designs, builds and owns property in 40 countries around the world. In 2007, I was honoured by an invitation to attend former US President Bill Clinton’s Clinton Global Initiative AGM in New York. That forum was to discuss ways to accelerate green buildings and emission reductions. I advise local and international governments on climate change and adaptation strategies for the built environment and I continue to work closely with the Clinton Climate Initiative.

A fortnight ago I was in Washington for the Annual General Meeting of the United Nations environment program Sustainable Building and Construction Initiative, of which I am a board member. I have already tendered the draft call to action developed at this meeting. The final section of this document is a call to all national delegations to the COP15 to be held in Copenhagen in December to include in the agenda item an emphasis on the building sector as a top priority that is fundamental to achieving significant greenhouse gas emission reductions.

As Mr Wall has said, we have been disappointed to date that the Australian government’s climate policy seems to have overlooked the non-residential building sector, despite the fact that it is responsible for more than 40 per cent of global energy use and one-third of global greenhouse gas emissions. That has been recognised by the likes of Sterne, the IPCC, McKinsey and others as the lowest cost solution to deep, fast emission reductions. While we have had some interest from government, we have been alarmed to be told by bureaucrats here in Canberra to come back in 2013 to discuss buildings. You may want to put to the concluding roundtable representatives on Friday whether they plan to address buildings in the Copenhagen Summit and, if not, why not.

Each month we are presented with a new report making it clear we will not make it if we do not include the building sector as part of the solution now. The insulation and solar hot water system solutions for 2.7 million houses in Australia will not get us there. Neither will increasing building code and performance standards, as these apply to new buildings only. In the non-residential sector, in the good times we were adding less than two per cent of stock per year.

We need a solution that provides an incentive to the building sector to accelerate and maximise energy efficiency in existing buildings. As I have said, Lend Lease operates in 40-odd countries around the world and in none of them have we found that solution—not the EU and not the UK—but we believe we have identified it here in Australia. It is a gift to government, if you like. We agree that the cost of inaction is far greater than the costs of action. Let me put it to you this way. The efficient building scheme will deliver environmental, social and economic benefits and unlike other sectors where reduction delivers emissions reductions, the beauty of the emission reduction in the building sector is that it basically delivers a lot more besides just emissions.

In Sydney the power blackouts in recent weeks have reminded us of the need for energy infrastructure. By driving demand reduction the efficient building scheme will defer, if not avoid, the need for investment in energy infrastructure. As Mr Wall has mentioned, the New South Wales IPART hearing a few weeks ago reported that $1 spent on demand reduction means a $6.5 saving.

Unlike the design of the proposed CPRS, which promotes the importation of cheap international offsets, our efficient building scheme would create offsets in Australia and jobs that will grow with them. Far from putting jobs at risk, the efficient building scheme would create jobs. We have estimated that it could create 46,000 new permanent high skilled jobs both in our cities as well as in regional Australia. The Davis Langdon research report, which was released last week, showed that in the commercial office sector alone retro greening office stock would create direct employment of more than 10,000 people engaged directly in the construction sector and that also means generating almost 27,000 new jobs across the broader economy. Lend Lease, in our own calculations, believes it is actually 10 times this. We call it the multiplier effect. For every one Lend Lease employee we know we actually provide 30 external jobs. We create them.

Energy efficiency buildings have also been shown to deliver health and productivity benefits. We are not asking for a handout to the property industry for billions of dollars of grants. We are here asking for a chance to contribute to Australia’s climate change response, and at the same time to create jobs and exportable business opportunities, while also positively impacting on the health and productivity of Australians. Better still, we have done the work and have identified how, too, simply by creating a cap and trade scheme for the non-residential building sector that will balance rewards for action with penalties for inaction.

This is a chance for Australia to lead the world in the response to climate change, and at the same time protect jobs in the industry and create new local jobs, exportable skills, and markets in the face of a global financial crisis. It is about building a better solution to climate change and positioning our business when the recession ends in the new carbon economy. It also addresses climate change impacts.

CHAIR —Thank you. Senator Milne.

Senator MILNE —It is very exciting to see what could be saved if we really put our minds both to the residential and commercial sectors, but I realise that you are here today to talk about the non-residential or commercial sector. As you rightly said, there are some white certificate schemes operating around the country and there is one view that perhaps we should roll those together and have a national white certificates trading scheme. I would like you to correct me if I am wrong, but I understand you see the advantage of your scheme in being that the white certificate trading scheme is voluntary and also it only rewards the good. It does not essentially have a driver in terms of a stick for any underperforming buildings and therefore no driver to upgrade them. If, for argument’s sake, your scheme were adopted, can it be set up as a completely parallel scheme to an emissions trading scheme, but set up in a way that, if an emissions trading scheme were later introduced, it could dovetail into that? I would like you to explain how that would work. If a scheme such as yours were set up, how quickly could it be implemented and does it have the support of people across the commercial building sector? Have you canvassed it with many people? Where is it up to in that context?

Ms Atkinson —I will start and I might work backwards from the questions. It has certainly been canvassed amongst the Green Building Council members and Property Council of Australia members. It has gone more broadly than that. I was invited for a two-hour presentation on it to the United Nations meeting in Washington. It has also gone to the Obama Administration and it is part of their debate on whether white certificates do or do not work. I would say that in Lend Lease’s operations in the United Kingdom specifically but also the European Union and the New South Wales government, where we have had white certificates for close to 10 years, the uptake generally is less than one per cent. The voluntary opt in is not an incentive for our industry and has not delivered the energy efficiency objective.

I will let Mr Wall talk specifically about the scheme. A general comment is that we designed this to be integrated in an emissions trading scheme that any country is looking at. We have taken it to China and we are engaged with the Singapore government right now about it. It can be part of an emissions trading scheme for a country, but the beauty is that it can also standalone. It does not have to wait for an emissions trading scheme to come into play. It can start now.

Mr Wall —I will add that we started off with a view that white certificates might be a good answer, too, but when we looked at it we saw a number of failings. Two fundamental flaws limit white certificates’ ability to assist the commercial property industry. One of them is a mechanism they apply called Deemed Abatement Factors, where the greenhouse saving is estimated for specific equipment. That is very limited in your palate of opportunity to upgrade an office building if you are only dealing with pre-approved bits of equipment. Therefore, it tends to be used for discrete pump replacement rather than reinvention of buildings, which we think we need.

The approach in New South Wales to overcome that problem is to introduce a whole building rating for white certificates. The problem with the whole building rating is the costs of proving up a project might be $50,000, and the value of the carbon abatement you might realise through proving that project might be only $40,000. We think the cost of white certificates will exclude 95 per cent of Australia’s non-residential stock by virtue of size. For those reasons alone there are some fundamental technical problems and then the overriding one, of course, which is that with voluntary participation we have not seen any examples where it has changed behaviour. It has just provided a bit more return for what you would have had anyway. That led us down the path of what we could do differently to our scheme, and we are looking purely at accounting with energy bills retrospectively.

As to the question of timing, we believe there is probably an 18-month reporting process required to collate data on the energy and carbon footprints of Australia’s non-residential stock to set the required benchmarks before you press the button on the actual trading of credits and permitting.

Senator MILNE —Who would pay for that, oversee and administer it, as you envisage it?

Mr Wall —We see it being administered at the highest level by the federal government. We do think that one of the problems we need to overcome to get universal adoption is to have the ability for our businesses to transact with brokers when the scheme is running, so that small buildings can transact with very minimal cost. We are looking at a year-by-year transaction cost of less than $500. We are using the analogy of the H&R Block tax adviser. We see a number of private providers transacting with private building owners and then acquitting the permits as necessary for a national register on behalf of the federal government. That puts a lot of the implementation costs in the private sector as well, and we do not have this issue of large registers and auction permits whereby you try to deal only with the top 1,000 polluters. This allows us to be absolutely equitable throughout the non-residential property sector.

Senator MILNE —Let us assume the government sets up the register, sends out the auditors and collects the data over 18 months, and now you have all the data about buildings. What do you do then?

Mr Wall —Every year we would expect every property owner to demonstrate their carbon footprint by way of electricity bills with the carbon intensity attached, get them certified and measured against what we say is the benchmark for their city, their geographic location. It means that building owners who own and operate a building that is poorly energy efficient will be above the average and will have to pay a penalty. They will have to acquit permits to match that excess energy use. Building owners who operate a building very efficiently will receive a credit, because they will be below the average.

Senator MILNE —Is that how you get to the point of forcing the property developer to design the building properly in the first place, because the likelihood of selling it is that it will come with a penalty? If you sell a shonky building nobody wants to buy it because they are going to incur those penalties ongoing.

Mr Wall —That is correct. We believe a mechanism where a building owner can project a potential liability 15 years out is very important to understand how that liability increases over time, and also being able to project potential credit opportunity by transforming that building is equally important. All of a sudden you get to capitalise a lot of future liability or a lot of future benefit into an investment decision today. We believe it will be intrinsic to bring capital back into the market and, in terms of risk profile, designing green building should provide the best leasing potential into the future. We have had some discussions with banks. They seem quite favourable and quite supportive. We believe it is something that will maintain money flows within the property industry and cannot be accused of revenue generation by the government.

Senator MILNE —Let us assume that we did this and got it up and running. If we started immediately it would take, by the sound of it, perhaps two years to get the system operational once your data is in. What do you estimate the current greenhouse footprint is of Australia’s commercial buildings? I understand 23 per cent of Australia’s greenhouse gases are from residential and commercial. What percentage of that is commercial? Let us assume we did this. What would be the reduction in Australia’s greenhouse gas emissions? In terms of the target, what could we achieve?

Mr Wall —I will talk about the 23 per cent, firstly. Whilst 23 per cent is a big number, we think it is conservative. In our analysis for numbers we believe there are a couple of errors in terms of the collation/preparation of that data by ABARE, which was used in the original analysis. We think it is at least 23 per cent, but the consensus tends to be more towards 30 per cent or 40 per cent. It is still a big number. Of that, 50 per cent is residential and 50 per cent non-residential.

Senator MILNE —About half is non-residential, yes.

Mr Wall —We believe 50 per cent cuts in existing building footprints are realistic with today’s technology. It is just about financial stimulus and signals to allow that intervention. You start to get the impression of the cuts that can be made for the benefit of Australia’s greenhouse accounting.

Senator MILNE —You would say that about six per cent of Australia’s total greenhouse gas emissions could be reduced by this one mechanism of energy efficiency for commercial buildings?

Mr Wall —At least. The other mechanism we would like to introduce through this scheme would be to allow the states and cities to set specific trajectories for their carbon footprints. They can do that in line with deferring future investment in additional infrastructure. In the current time that means less investment in new coal-fired power stations, because we can make do with our existing, and we avoid the maximum demand peaks, which have been causing us to recommission old power stations, with poor environmental outcomes. Demand management is the key.

Senator MARK BISHOP —This is a very timely and fascinating submission. I have one issue that I want to pursue. It arises from chapter 4 of your submission. You have some figures there. You advocate greenhouse gas emission reduction from the non-residential building sector. Are you able to offer us any advice, firstly, on the marginal cost of such reduction and, secondly, has there been any work done comparing the cost of greenhouse gas emission from the sector that you are involved with vis-a-vis other sectors of the economy that emit greenhouse gas? Is the marginal cost of reduction identical across all sectors or is there a variable involved? Where do you get your bang for your buck?

Mr Wall —There have been various studies done. They are all subject to scrutiny, but the consensus seems to be that our sector, demand abatement in the property sector, is where the low-hanging fruit is, the biggest return for the economy with the least investment. Studies have been done by McKinsey Group, both overseas and local to Australia, and also by organisations such as Vattenfall which have been cited by the IPCC and Stern. All of those have identified that reducing the demand in inefficient building stock is where the best opportunity is to reduce carbon emissions for the benefit of the economy with least cost to the economy.

At the far end, the most cost intensive, we have renewable, being photovoltaics, and we have emerging technologies such as carbon sequestration and storage. This is just about overcoming market failures for what should have been done in the first place, which is about building efficient building stock with a low cost to the people occupying the builders, the people owning the buildings and, more importantly, a low cost to society through greenhouse generation.

Senator MARK BISHOP —In chapter 4 of your submission you refer to state that if upstream emissions from heat and electric are included, the emissions from buildings total 40 per cent of global greenhouse gas emissions. Firstly, is that figure consistent with the figure in Australia for the sector you represent?

Mr Wall —It goes back to the discussion about the ABARE results and the 23 per cent, which was raised previously by Senator Milne. There is a lot of conjecture about the true carbon footprint of building stock in Australia. It is at least 23 per cent. The global figures quoted by the likes of the United Nations Environment Programme are much higher than that. Globally, they talk about a total of 40 per cent. It is a big number.

Senator MARK BISHOP —Do you say somewhere between 20 per cent and 40 per cent?

Mr Wall —Twenty-three per cent would be at the absolute low end; 40 per cent would be the upper end. Thirty per cent would probably be a realistic figure.

Senator MARK BISHOP —Also, in that paragraph you refer to upstream emissions from heat and electricity and whether they are included. How far upstream are we going? Are we going up to all factories that use electric and gas?

Mr Wall —This excludes industrial and factories. This is talking about buildings that are essentially occupied for services, include hotels and so on. When we talk about upstream emissions, this goes back to why we think a point of obligation directly on the purchase of electricity is so important. The current design of the CPRS is that the permitting will be done at the scope 1 emission, which is our generator. The problem we have is that we have the generator. We then go through market traders and then a distribution network. By the time it reaches our building owners we are four price signals away from the carbon price, and by the time it reaches the building users the tenants are now five points away. It is very diluted and there is very little opportunity for concrete pass through of cost implications.

Senator XENOPHON —I will ask you to take this on notice given the time constraints. Further to Senator Bishop’s line of questioning, could you provide any economic modelling, any cost-benefit analysis in terms of new green buildings and in particular refurbishing existing stock, and outline what the benefit of that will be both in terms of the multiplier with respect to jobs and also the cost-benefit of reducing emissions compared with, for instance, renewables or other measures to abate?

Mr Wall —I am very pleased to do that. I am very happy to receive any questions on notice. We will be making an additional submission with our response. It probably should be noted by the committee that our capacity to model has been somewhat limited. We have made several requests to Treasury to model the impacts of how this might affect the building sector.

CHAIR —I have a couple of questions. Is there enough demand in the market for the more efficient product to prevent the effects of your scheme being passed basically through leases to tenants? I understand what you are trying to do is break that nexus that we talked about. I agree that is a significant issue, and demand is going to be one of the issues that helps to prevent that. You obviously operate in a broad number of markets. In particular in Australia is there enough demand for that high quality energy efficiency to actually be one of the drivers for prevention of pass through?

Mr Wall —Everybody is fully aware that we need to create energy efficient building structures and operations. The problem lies in terms of people making price point decisions at the point of leasing. There is a lack of clarity when you lease a building as to what the energy footprint is. It is not true that we know what the carbon footprint of certain buildings is when we lease. We are not always privy to that information. We are not always in a bargaining position. It is only the largest tenants who can dictate what sorts of buildings they want built for them. Most of us are in the market for secondary tenancies, buildings that have had a previous life, and you are limited by the options available in the market. You cannot have financial levies to get any incremental improvement, particularly when you have 20 tenants going into one building and every tenant wants different things. We do believe this is a point of responsibility for the property sector towards the economy and society. Therefore, we are basically trying to provide a direct price for carbon that is recognised and attached to the building owner so that they can then make the right investment decisions rather than rely on tenants having to pay extra.

CHAIR —I understand the intent and I am not arguing against it in any way. I support what you are trying to do. I am just asking what the mechanism is that you would use to get around the willingness of an owner to pass it through, because that is the natural tendency. Will there be a public register, for example, of energy efficiency of buildings so that potential tenants can make those informed decisions as part of this process? I am on your side. I am just trying to find a way to get through—

Mr Wall —I think I now understand the question a bit better. There is a natural tendency and it happens. Outgoings are passed on to the tenant. We do not see that changing through this. We are trying to do this to work with the way industry works. Where it kicks in for a building owner is if you are investing in a future asset it will go directly to how much you will pay for that asset in terms of future liability. You will have that ongoing permitting obligation for the next 15 years life of the asset, versus turning it into a credit. It is a money owning opportunity, as much as—

CHAIR —A market mechanism?

Ms Atkinson —Exactly. That is the point; it will drive a market mechanism. The building owner is already obligated in some markets to be disclosing the carbon emissions. Lend Lease does a global greenhouse gas emission account every year of our building stock, anyhow. The disconnect is getting the tenants to understand that this is a greener building and the benefits that come from that. I would just separate existing buildings from new buildings. In the commercial office market Lend Lease is building nothing but green commercial office buildings. That is not just because we want to be a sustainable company, that is because the market demand for green exists. There is an emerging value proposition for tenants, but it is quite slow when we deal with existing buildings.

CHAIR —I understand and recognise there are issues with respect to the existing built environment.

Ms Atkinson —Yes.

Mr Wall —Just to further expand on the point of mandatory disclosure, we have also made submissions in full support of mandatory disclosure to the federal government. We think that is an effective mechanism. However, we would like mandatory disclosure to be designed in such a way that it can feed into the future carbon trading environments. At the moment the schemes being produced for mandatory disclosure are incompatible with the aims of carbon trading in the Australian economy.

CHAIR —We will need to finish. How long have you been engaged with the government on this?

Ms Atkinson —We started in February last year. Our first submission was around mandatory disclosure to the Department of Environment, Heritage and the Arts. We then went through the Garnaut review process and put in formal submissions to every opportunity. We are now up to our tenth or eleventh submission through the process. It has been helpful. We did not know what the solution was. Now, what we have tabled is in fact what we know and have taken around the world and tested with owners, developers, construction managers and asset managers from the industry. We know that it has the capacity to work and to work quickly.

CHAIR —What part do you see this process playing in Copenhagen? Obviously, it is not necessarily going to be a strong point from our Australian perspective, but is this going to be a significant part of the overall discussion in Copenhagen?

Ms Atkinson —I do not believe so. I put on the record that in Bali last year there was no mention of energy efficiency as part of the formal proceedings. The international delegation, as part of this work that I have just done in Washington, is based on the fact that there is not a conversation around demand management energy efficiency in buildings. The most recent reports of the last month identify every country cannot get to their targets without addressing buildings, so hence the call to action that I have tabled today as a draft. I doubt it will feature in Copenhagen.

CHAIR —This is a leadership position that we could be taking.

Ms Atkinson —I totally believe so.

Mr Wall —There is growing concern amongst other countries with emission trading schemes that they have to directly deal with scope 2 emitters. I would defer the committee towards the UK carbon reduction commitment, which they have introduced because white certificates have failed them. Their proposal from January 2010 is to charge every single user of electricity above a certain size a price per tonne of carbon associated with that. I think there is a leadership opportunity for Australia at Copenhagen and it will dive straight into an issue that other countries are scrambling to solve at this very moment.

CHAIR —Thank you for your evidence. Senator Milne.

Senator MILNE —I would like to put a question on notice relating to accessing overseas permits. If you have an emissions trading scheme what is your proposition to limit permits so that there is an incentive to buy abatement credit offsets in Australia from your sector? Let us assume you are doing a second scenario, a parallel system, do you say that you can only buy the offsets from within the system? How would that work?

Ms Atkinson —Thank you.

CHAIR —There may be some other questions on notice and you have indicated to us already you would be prepared to accept those. We would appreciate your assistance with those. Thank you very much. I call representatives from Origin Energy, and note for senators that we do have a revised flight path for this afternoon and this evening. Hopefully you will assist me to keep as close as possible to it, noting that we are five minutes behind already.

 [2.45 pm]